Local TV Economics

Since the passage in 1996 of a new Telecommunications Act, all of the country’s television stations have been allowed to reach their viewers by “multicasting” on as many as six channels — simultaneously. Investment in this new digital technology, though a lot of effort, also means the eventual end of the conventional analog, one-channel version of television (see more on multicasting in Cable TV Newsroom Investment).

Some stations took advantage of the new rules by providing more coverage of local events (e.g., WRAL in Raleigh uses its digital spectrum to air high school basketball and community board meetings). Others formed partnerships to provide specific services (e.g., some NBC affiliates were participating in a 24-hour weather-only channel; ABC News Now provided expanded ABC News reporting to the network’s owned and operated stations).

But over all, the switch to “multicasting” has created upheaval in the local television landscape.

Many local stations are worried that they may not be able to take advantage of new revenue streams unless there is a mandate that cable systems carry every channel the local stations transmit. Thus, broadcasters are fighting with cable systems over how the channels will reach the public. The National Association of Broadcasters (NAB), a powerful Washington lobby, wants the FCC to decree that local cable companies must carry most of the broadcasters’ multicast channels. The cable companies, represented by the National Cable Television Association (NCTA) argue, on the other hand, that the government shouldn’t be telling a major industry what it can or cannot do. So far, the broadcasters have been unlucky at the FCC, which ruled against two types of “must carry” regulations in February 2005. One version would simply have required cable systems to carry two channels from every local station; the other would have required them to carry every channel from every local station.

TV stations warned that there was no incentive for them to develop additional channels if cable systems aren’t required to carry them, and basically argued that the FCC was stifling local initiative. The cable systems argued that the FCC shouldn’t make cable systems carry programming they don’t want to carry.

In February 2006, President Bush signed into law legislation that sets February 17, 2009 as the official shut-off date for analog TV transmission. But this is the second time a shut-off date has been set (the first was to be 2006) and there is always a chance the date could slip again.27

The arguments between cable and broadcast, and the question over where the FCC’s authority lies, could heat up as the 2009 deadline for TV stations to turn over their old analog spectrum moves closer.

Research groups such as Points North Group and Horowitz Associates warn that the federal government’s push for digital television by 2009 will wreak havoc with TV customers. They say that the 55 percent of TV homes that have cable have no digital signal — and do not intend to get it.

In U.S. homes, while the primary TV set may be connected to a digital set-top box, second and third sets in the home don’t necessarily have such boxes. Instead, those TVs get cable signals directly from coaxial cables that run into homes. That represents about 67 percent — or 180 million television sets — in the U.S. Who is going to pay for the extra box that you are going to need? Senior analysts ask. Will the cable company be forced to give you a box?

Digital signals will be given free to the private sector. But analysts say that not all broadcasters are ready to spend the money to abandon analog and switch to digital — especially in the short span of three years, as required in the law’s time frame. And cable operators could be adding to the confusion. Right now, only 25 percent of cable subscribers have digital set-top boxes.

The changeover also involves tough political questions, since it is argued that by and large, those losing TV service will be the low-income households that can’t afford to switch. And politicians, with an eye on the midterm and general elections before 2009, might want to hold off on any important decision on the end-date of the digital switch.

Conclusion

In the universe of newsroom profitability, the data show three worlds: The rich generally are those in the top 25 markets. The poor, although that term may be a relative one, are the bottom 151. And a lot of stations are in between. While the majority of news directors recorded profits, the middle-tier stations — markets 51-100 — were also showing greater losses that the previous year (6% to 11%), and those are numbers that emerged during the robust year of 2004.

The message here may be that newscasts that are on the fringes of viewership — the sixth, seventh or eighth-ranked local news stations in the largest markets and the fourth, fifth or sixth-ranked stations in medium markets — are in jeopardy.